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I knew about multi-level marketing before I knew what multi-level marketing was. How? Well, as a kid, my Mom sold Mary Kay. Actually, she’s been involved in several of these “businesses” throughout her life but I distinctly remember the Mary Kay days.
I remember walking down the sidewalk in Brooklyn and she’d see one of those pink Cadillac’s drive by and say something along the lines of “one of these days, I’m gonna own one of those”. It was like a scene out of the Pursuit of Happyness except, instead of her carrying some clunky medical device, it was a tote bag full of products.She explained it just like I must’ve explained how I, at 12, was going to buy her a big house one day…just as soon as I signed with the Knicks. It was a dream and as you may have guessed, it never came true. Click To Tweet
I suppose the one benefit of this experience was the never-ending supply of skin care products I had access to as a teenager prone to acne breakouts. While all the other kids were buying over-the-counter Noxzema and Clearasil, my pubescent a$$ was on that grown man, prescription-strength, you can’t get this in stores Mary Kay Cosmetics men’s line.
It was a whole thing.
First, I’d scrub with a cotton ball and a few dabs of a mouthwash looking cleanser, lather and wash with the women’s line soap and finish with pimple cream across my T-zone. Now, if I was having a really bad breakout, I’d use the presumably stronger men’s facial soap bar, in it’s distinctly masculine grey and black box instead of the pink bottle girly stuff. I did this twice a day for what felt like three years and never ran out of product.
There were boxes stacked behind the door, backup bottles tucked below the vanity in the bathrooms and pre-made decorated baskets next to our encyclopedias, getting dustier by the minute. I couldn’t make enough pimples to burn through it all!
That was the 90s. I never gave multi-level marketing much more thought until the late 2000s, in the thick of the post-recession slump. Like millions of others, Mom was struggling to get by and forced to tap into her meager retirement savings to make ends meet. She’d cycled through a few career pivots by then and was in a spiral of repeated downsizing when she was invited to attend a once-in-a-lifetime opportunity in a hotel ballroom. The hotel happened to be walking distance from my job at the time so I figured the least I could do is stop by and join her to help evaluate the pitch.
I also happened to be in a suit that day because I had a big presentation and was entertaining clients after work. I knew giving her a chance to see her baby boy all dressed up would be a special treat for her. The moment I saw the easel with the hard-foam marketing poster, I knew what was up.
And in that moment, it all came rushing back. The stacks of unused inventory in our Brooklyn apartment, me learning how to curl ribbons with scissors for gift baskets, and Mom’s odd affinity for the Pontiac Grand Am; the stepping stone vehicle before reaching Pink Cadillac levels.
But I was also struck by the faces in the room.
There were other women, just like her, who were likely on the latter ends of their career and trying to figure out their next steps. There were older men, who looked like they were recruited straight out of someone’s pew, ready to take their next step to changing their financial lives. And there were people my age too.
I distinctly remember seeing and avoiding a dude I went to undergrad with. I always wondered what happened to him and it was safe to say, he didn’t graduate or he transferred…who knows. He too likely felt that he’d stumbled upon a potential game-changing opportunity; that in addition to everyone else, today was his lucky day.
During the pitch, I held my tongue despite the spotty details, lack of transparency and sketchy presentation. Afterwards, I asked my Mom what she thought, hoping she would shrug her shoulders and tell me that it was a waste of her time. To my displeasure, she was on the fence about it. But she wasn’t skeptical because she was suspicious of what was presented; she was just scared to give MLMs another try. This would’ve been her third attempt at scaling a pyramid.
I knew in that moment that my job as her son had changed forever.
I knew right then that I could no longer assume she could thoroughly evaluate business opportunities, investment decisions, service providers, contracts, insurance documents or make expensive purchases by herself. Watching her consider this opportunity in real-time illuminated every financial red-flag I’d ignored over the years.
This was the beginning of her financial insecurity revealing itself and I knew I had to do something. She’d sacrificed her adult years to get me through school, supported me through earning a graduate business degree and laid the foundation for me to build an amazing life.I needed to remind her that she could be more than just proud of me. She needed to know that she could rely on me to help her make decisions she may have been uncomfortable making on her own. Click To Tweet
I’d never thought of my Mom as desperate before.
As a single black mother, she’d only ever portrayed an image of strength and stability. But in this moment, I had to accept that the pace of the world she was living in exceeded her own ability to process information. She was getting older and the jobs she used to be a shoe-in for were more competitive or simply didn’t exist anymore. And she wasn’t alone.
In that room, I saw the economic fragility of an entire community. I saw desperation in the eyes of black and brown faces, young and old. Each of them taking notes feverishly, nodding their heads to the
pastor speaker, doing fuzzy math in their heads and envisioning themselves making more than they’d ever dreamed of.
Many of them were likely under-employed, going through tough times,had unfulfilled potential and immediate needs for cash. But sitting there in my fancy suit, having just left my fancy corporate gig, I knew they lacked a certain pedigree many employers required before they’d even consider offering them a job at certain levels.
They likely weren’t fluent enough in the empty and loaded language required to navigate the hallways, meeting rooms and social outings required in corporate America. They couldn’t talk that $hit. So opportunities like this, to work in the “legal” profession, without legal experience seemed right up their alley.
In the past ten years, I’ve been pitched to join MLMs more times than I can remember. I’ve gone to friends home’s expecting to just hang out, only to be pitched at halftime to join someone’s team. I’ve been pitched specialty coffees, juices, powders, multi-vitamins, financial services, gas-line distribution, legal services, knives and travel services. I’ve also seen women I know selling cosmetics, waist-wraps and jewelry on social media consistently for the past few years.
Here’s what I believe.Many MLMs prey on people who are vulnerable. Perhaps the worst part is that these companies sense their prey's vulnerability before their prey does. Click To Tweet
MLMs are the equivalent of the old dude in the club waiting until juuust before the lights come on to play their hand on a heart broken woman. Jerome is not her first pick, but if she’s hungry and it’s 3 AM…she’s gonna get a slice of something.
I used to enjoy these pitches. For me, it was a game where I’d find myself anticipating the next line and predicting the big sell. I’ve even gone so far as to try and help the person see how ridiculous their claims were but, to date, I’ve never successfully converted anyone on the spot. Go figure! Instead, they typically start dangling their car keys in my face, showing me trips they’ve taken and pictures of checks they’ve cashed recently to combat my POV.
They get offended by my suggestion that what they’re doing teeters on the edge of morality and that big corporations are just as sketchy as I’m suggesting their business model is. I can’t argue against that. In fact, I usually end up complimenting them on their persistence and salesmanship while reminding them they are exceptions, not the norm.
For you [the reader], I don’t suggest taking my approach. Looking back, I can admit it’s tacky, though the same could be said for the people who’ve snuck in MLM pitches while I was re-upping my Rotel. Rather, I’d recommend considering a few things before entertaining joining a multi level marketing. Consider this a lil bit of homework you can give yourself before signing the agreement.
Conduct due diligence
Before I ever applied for a job I did research on the company. Similarly, if I were to consider buying or starting a business, I would do some research to make sure the product and company are legit. Specifically, I’d do the following:
- Interview other [non-biased] business owners to get first-hand testimonial
- Try the product myself to see if it’s worth the hype or that it does what it’s supposed to do
- Conduct searches online for feedback, legal claims or certification with the Better Business Bureau
- Conduct competitive research to understand the industry landscape and how this particular company is positioning itself compared to others
- Evaluate the contract between yourself and the organization. I’d specifically look for information to help identify what risks I may incur in starting this venture
Many of the MLM’s I know of, don’t scratch the sniff test on enough of these boxes for me to even consider joining. And I’m sorry, ‘helping out a friend’ is never a good reason.
How the data is presented
I’m a bit of a presentation geek. I see them as not just an opportunity to present the facts but to establish credibility with your audience. With that said, the vast majority of presentations I’ve sat through have been absolutely horrible. The biggest red flags that make my well-trained BS detector go haywire are:
- not offering credible sources for claims made
- making smooth growth assumptions (e.g. NOTHING goes straight up forever ever)
- Misleading charts to tell the story they want to tell instead of the whole truth
- focusing more on earning potential vs. the value of the product/service
- Promoting the top line revenue without sharing revenue contribution. Specifically, what percentage of this “billion dollar business” is earned from distributor fees collected vs. net products sold and how has that changed over the past few years
They say “it takes money to make money” but really? If I have to buy minimum amounts of inventory, wouldn’t it make sense that I also have some understanding of the cost of the product? Otherwise, how can I, as a distributor, properly understand the value I provide? Furthermore, how can I justify the price I offer to my customers? Let me explain.
In many MLMs, you’re required to purchase a minimum amount of inventory on a regular basis. Why? Well, I believe it’s so they [the manufacturer] have some degree of certainty on the the amount of product to make and what it will cost them. But if we’re in business together, why can’t that certainty be extended to me? What’s with all the secrets?
If I were to consider buying a Dunkin Donuts, I would absolutely have an idea of how much it cost to build and operate BEFORE I bought it. I would also be able to measure the cost to make a donut or a single cup of coffee. This helps me, as a business owner, understand how to manage my labor costs, pricing, marketing and the cost of my own time. Otherwise, you’re guessing, which is a recipe for business disaster.
I’m gonna stop here. This post is already way longer than we typically write. We could go down the rabbit hole of big media exposés, countless legal claims, mathematic impossibilities, shady characters that constantly re-invent themselves and utterly heartbreaking stories of families left broke but, we wont.
If you’re a part of an MLM, please know that I’m not trying to insult you, your character, abilities or intelligence. But I do know and believe that the sheer number of tragic stories and failures these companies have left in their wake should be an indicator to you of your likely outcome.
Considering our mission, to help encourage better conversations about money, we felt it was our obligation to address a topic that impacts our community’s ability to get out of debt and build wealth. If that means we have to touch a third-rail topic every now and then, so be it.
But hopefully, maybe, if we’re lucky, God willing and the creek don’t rise someone pitches you to join a multi-level-marketing operation, you at least now have a homework assignment before diving in head first. And now, this…